UK

IFS backs Rachel Reeves’s claim that Labour inherited a worse financial situation than expected

Basit Mahmood 

29 August, 2024

Left Foot Forward

So much for the Tories being the party of ‘sound finances’.

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The Institute for Fiscal Studies (IFS) has backed Chancellor Rachel Reeves’ claim that the Labour government inherited a worse financial situation than expected.

Reeves has repeated the claim over recent weeks, saying that the Tories had left a £22bn black hole in the country’s finances for Labour to clean up, meaning that the new Labour government was limited in its spending plans, with less fiscal headroom than previously thought.

Former Chancellor Jeremy Hunt and the Tory press have sought to discredit the claim, however the IFS has now shown that ‘in black and white that there was a black hole in the public finances that was previously unknown’.

To use one example, the Guardian reports that the Home Office repeatedly submitted budget figures under Tory ministers which officials knew understated the ballooning cost of asylum and illegal immigration spending.

The paper reports: “Analysing three years of financial records, the IFS found the Home Office had told parliament at the start of each year it needed an average £110m to cover the UK’s asylum, border, visa and passport operations. However, it ended up spending vastly more: an average of £2.6bn a year.

“The Home Office has got into the bad habit of submitting initial budgets to parliament that it knows to be insufficient, in the expectation of a top-up from the Treasury’s contingency reserve later in the financial year,” it said.

So much for the Tories being the party of ‘sound finances’.

The Director of the IFS, Paul Johnson, has also admitted that when Reeves released her findings from a Treasury audit last month she had uncovered spending that “does genuinely appear to have been unfunded”.

Basit Mahmood is editor of Left Foot Forward